In this case, employees from three statutory corporations—IFC, LIC, and ONGC—were terminated without being given a chance to be heard. Bhagat Ram challenged his termination in the Orissa High Court under Article 226 of the Constitution, and the court ruled in his favour, setting aside the termination. However, when Sunil Kumar and Sukhdev Singh filed similar writ petitions in the Patna High Court and Punjab & Haryana High Court respectively, both their petitions were dismissed. Later, all three employees, along with their respective corporations, approached the Supreme Court under Article 136 of the Constitution through special leave petitions to appeal against the decisions of the High Courts.
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Issue before the Court
The issue raised before the Honourable Curt was that whether statutory companies included by Article 12 of the Indian Constitution as states?
Arguments before the Court
The petitioner’s counsel argued that if any employee is removed in a manner that violates the rules and statutes which have the force of law, such removal is illegal and invalid. They contended that in such cases, the affected employees should not only receive compensation but also be allowed to continue in their jobs, as the termination itself has no legal backing.
On the other hand, the respondent’s counsel submitted that the rules in question are not laws, but rather contractual terms and part of the corporation’s internal functioning. Hence, even if those rules are violated, the remedy would only be damages—not reinstatement of the employee. They further relied on Section 12 of the ONGC Act, the IFC Act, and Section 23 of the LIC Act, stating that these laws give corporations the authority to appoint and manage their employees, including framing service conditions and handling employment matters internally.
Analysis of the Court
The Supreme Court examined the relevant provisions under the IFC Act, LIC Act, and ONGC Act to decide whether the actions of these corporations were in line with the law. It specifically looked at Sections 31 and 32 of the ONGC Act, Section 43 of the IFC Act, and Sections 48 and 49 of the LIC Act, which deal with the power of these corporations to make rules and regulations about employee service conditions. The Court emphasized that statutory corporations like IFC, LIC, and ONGC are treated as “State” under Article 12 of the Constitution, as held in the case of Rajasthan State Electricity Board v. Mohan Lal (1967). Being considered as "State" means they must follow not just the relevant statutes but also constitutional mandates like Articles 14 and 16, which ensure equality and fair treatment in public employment.
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The Court further observed that the regulations made under the respective Acts of these corporations have the same authority as law. So, any action they take that goes against these regulations or statutory provisions can be challenged in a court of law. Since the order passed by the corporations violated these statutory rules, the Court held that the employees not only deserve compensation but also have the right to continue in service as per law.
Concluding Remark
In conclusion, the judgment made it clear that even statutory corporations created by parliamentary laws will be treated as "State" under Article 12 of the Constitution. This means they are also bound to respect fundamental rights just like government departments. The court’s decision gave much-needed protection to employees of these corporations, ensuring that they cannot be treated unfairly or arbitrarily. It also emphasized that when such corporations perform public functions, they will remain under the supervision of the judiciary to make sure they follow the Constitution.
